Causes and Consequences of the Great Depression: Analytical Essay

The 1930s was dominated by the Great Depression. The crash of the stock market caused mass panic. It was cataclysmic and exposed deeper economic issues that caused the long term crisis. As the nation faced an incredibly high loss of assets and saw unemployment rates rise exponentially, ways meant to protect from further loss only proved to be destructive. Hoover did not seem to do enough for the nation, often encouraging self-reliance and local communities to care for the other. The state of the nation was in poverty, and the veterans of WWI especially seemed to take a hard hit. The New Deals, under Roosevelt, helped relieve the nation but did not necessarily fix everything, nor did they try to change the social structures of the nation.

The Great Depression was a defining moment of the twentieth century that forever changed the US government’s role in the economy. On October 24, 1929, the stock market crashed. Black Tuesday was the grinding halt to the period of economic prosperity and cultural edge known as the Roaring Twenties. Stock market prices plummeted and people panicked alongside it, trying to pull out whatever money they had, creating a spiral effect which ensured the crash. By this time, it was quite common for the average American to invest in the stock market but within the first few hours, ten billion dollars in investments vanished (approximately equivalent to 100 billion dollars today) and in one month, sixteen billion dollars was lost. Many people lost everything. However, the stock market collapse did not weaken the American economy by itself, rather it exposed the multitude of factors, plus the panic, leading to the greatest economic crisis. There was also no safety net, no unemployment benefits, nor food or shelter assistance to help the nation.

The Great Depression’s origins are complicated and stem from more than just the stock market crash and panic. Many Americans were economically prosperous during the Roaring Twenties, but many problems lay beneath the surface. By this time, consumer culture had grown to become massive, yet prices were too much for the average person. So credit culture continued to grow. People paid for bigger and newer items on credit or through installment buying. On their own, these credit and installments are fine until economic uncertainty increases and it is revealed as unsustainable. Investors bought stocks on credit as well and were ultimately overextended. There was also rising inequality among classes. The nation, as a whole, prospered, but the divide grew as wealthy investors were favored and only gained more money to spend on luxury items to show their wealth. As the end of the twenties neared, the wealthy had bought the things they wanted and the demand for indulgent items, such as automobiles, declined. The same industries that had boomed in the early twenties had to scale back; they could not sell all their inventory and so had to release workers. These workers then could not afford to consume products anymore. A downward domestic economic spiral ensued. The agrarian economy as well suffered through most of the twenties. Moreover, by the time Hoover signed into law the highest tariff in American history in 1930, international trade was already suffering due to economic issues and overall debt overseas as repercussions of WWI. The tariff discouraged international trade, further harming American businesses. Early responses to panic caused economic policies to fail, tightening of credit, and banks going out of business as well.

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The causes of the Great Depression were structural flaws, destructive protectionism, and panic. Ensuing issues after the crash of the stock market included economic and environmental disasters and forced mass migrations. By 1933, the national unemployment rate had risen to twenty-five percent and for African Americans, it rose to fifty percent. About half of all US financial institutions collapsed, further creating a decline in money supply and disintegration of lending. Prior to the crash, the agrarian economy already was struggling. After the crash, many farmers had no choice and lost their land to creditors when the Great Plains region of the US suffered severe dust storms during a dry period, later known as the Dust Bowl. These droughts lasted from 1932 to 1936, from Texas to the Dakotas. For many in these states, their only hope was to move West, towards areas that experienced rain, produced crops and hopefully jobs. This was the first significant reversal in the flow of people between rural and urban areas. Eventually, many states and towns put up billboards and signs saying that there were no jobs left there and to keep moving.

Everyone everywhere was struggling. Yet in response, President Hoover advocated associationalism over government intervention. Maintaining a healthy work ethic, self-control, and self-initiative were emphasized. Economic growth would depend on its people and their self governing. Whereas getting help from the government was seen as a “deadening hand”, where laziness would grow and both the community and the individual would lack responsibilities. Hoover asked business owners to maintain their investments and employment, encouraged the state and local charities to provide assistance to those in need, and organized POUR (the President’s Organization for Union Relief). Its commission was to help US citizens who had lost their jobs by coordinating local welfare agencies without spending government money. And communities did try to help each other. For example, Al Capone, a notorious crime boss, opened a soup kitchen in Chicago. But, most charitable organizations closed within a few years. The amount of need was overwhelming and the aid from the conservative politics of Republican Congress was not enough. Also, the Great Depression created a big divide between veterans from World War I and President Hoover. These veterans became known as the ‘Bonus Army’ due to being promised a bonus by 1945 for their service, but they demanded an earlier payout out of necessity. By 1932, Congress met for this and created a bill to make this possible, yet Hoover opposed it.

The Depression had exponentially increased the number of homeless people and they clustered together in hundreds of shanty towns across the nation. Veterans were no exception. 15,000 veterans and their families created a homeless encampment in Washington, DC and as protest, they called it “Hooverville”, making it clear that they blamed him for the economic crisis and their deep troubles because of it. Hoover did not tolerate this and denounced the veterans in Hooverville as insurrectionists, issued vacate orders, and sent in excessive force, through police, soldiers, and tanks, to burn their camp down. As veterans of WWI, they had witnessed many horrors from trench warfare, and faced terrible injuries not only physically, but mentally as well. They came back with depression and post-traumatic stress disorder. Despite all their efforts, the very nation and government they had fought for seemed to turn its back on them. Hoover’s response to the Bonus Army further pushed US citizens to lose faith and trust in their government. By 1932, Hoover ‘ran’ for president, as if he did not want to win, and charismatic politician Franklin Delano Roosevelt won in a landslide and his response to the Great Depression, known as the New Deals, is oftentimes seen as synonymous to his presidency. During his campaign, he had suggested that it was the government’s duty to ensure a comfortable living for the average American man, which was very different from Hoover’s associationalism. Passed by Congress, the New Deal was a series of programs and projects; simplified, their purpose can be reduced to ‘3 R’s’, relief, recovery, and reform. Impoverished people would be given monetary aid through relief programs. Recovery programs were meant to temporarily help the economy through stimulation of workforce growth. And reform programs were meant to regulate the economy and prevent future economic crises like the Depression.

A big change included the establishment of social security. A large amount of support for the New Deal came from white Southerners. They elected their local leadership alongside their congressional leaders, which ensured that the Agricultural Adjustment Association and the National Labor Relations Act (the Wagner Act) would exclude sharecroppers, tenant farmers, and domestic servers. As a result, the percentage of the people left out was disproportionately African American. The New Deal seemed reluctant to change foundational economic and social structures. Racial inequalities stayed strongly prevalent. Moreover, a strong “voice of protest” came from Senator Huey Long of Louisiana. His populist rhetoric appealed to many impoverished and homeless people; his proposal of a Share the Wealth Program sparked many clubs across the nation to fight for the redistribution of the wealthy’s assets amongst everyone else in need. Overall, the government’s address to the Great Depression through the New Deals was both completely new yet stayed conservative. It did not completely fix the Great Depression but significantly helped the many in need. The Great Depression transformed everyone’s understanding of the role of government in the economy. We are entitled to a comfortable living but only recognized this after tremendous economic uncertainty and turmoil. Black Thursday, the day the stock market crashed, did not cause the largest financial crisis of US history, rather, it exposed the deeper issues that, with mass panic, lost the nation a high amount of assets. The global market, domestic industries, and individuals all struggled. Social inequalities persisted. The New Deals did not address racial issues. Yet, Franklin Delano Roosevelt was able to put the nation more at ease than his predecessor. Today, many debates surrounding welfare, the price of healthcare and education, and racial and class inequality continues to exist. In spite of persistent struggles, like the ‘Okies’ of the mass migration, many people today continue to keep moving forward, hoping for a better future.